What is the CARES Act? The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on Friday, March 27, 2020.
The CARES Act builds on the two former pieces of legislation and is aimed at providing relief for both individuals and businesses that have been negatively impacted by the coronavirus outbreak.
Waives retirement account early withdraw penalty:
This provision waives the 10-percent early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts made on or after January 1, 2020 for coronavirus-related purposes. Withdrawals are still taxed, but taxes are spread over three years, or the taxpayer has the three-year period to roll it back over.
Temporary waiver of minimum distribution rules:
This provision provides relief to individuals who would otherwise be required to withdraw funds from certain defined contribution plans and IRA accounts during the COVID-19 economic slowdown by waiving the required minimum distribution rules for calendar year 2020.
Employee Retention Payroll Tax Credit:
This provision provides a refundable payroll tax credit, capped at $10,000 per employee, for 50% of wages paid by employers to employees from March 13 through December 31, 2020. Employers qualify if they either (1) are subject to a full or partial shut-down order due to the COVID-19 crisis, or (2) see gross receipts decline by more than 50% when compared to the same quarter in the prior year.
Delays Payroll Taxes:
This provision allows employers to defer payment of the employer share of the Social Security tax that they are responsible for paying to the federal government with respect to their employees. Employers may defer their employment tax over the following two years, with half of the amount due by December 21, 2021 and the other half by December 31, 2022.
Allows AdvanceTax Credits:
This provision waives penalties for employers who fail to make federal payroll tax deposits if such failure is due to the anticipation of a credit under the Paid Sick Leave or Paid Expanded Family Leave provisions of the Families First Coronavirus Response Act (FFCRA).
Clarifies Paid Family & Sick Leave Requirements:
This provision clarifies that Paid Expanded Family and Medical Leave may not exceed $200 per day and $10,000 in the aggregate for each employee, and broadens the $200 per day and $2,000 aggregated Paid Sick Leave to include all situations when an employee is not able to work while caring for another person.
Paid Leave for Rehired Employees:
This provision clarifies that employees who were laid off on March 1, 2020 or later, can still be eligible for paid Expanded Family and Medical Leave described in the FFCRA once they have been rehired, as long as they had worked for the credit union for 30 of the last 60 calendar days prior to their layoff. This provision doesn’t appear to include Emergency Sick Leave.
Postpones ERISA Deadlines:
This provision permits the Secretary of Labor to postpone ERISA deadlines, due to a public health emergency, for up to one year for pension and other employee benefit plans, sponsors, administrators, participants and beneficiaries.
Flexibility for Single-Employer Pension Plans:
This provision delays the minimum required contributions due during calendar year 2020 for single employer pension plans until January 1, 2021, increased by interest between the due date and the payment date.
This summary is not a substitute for legal, tax, or employment advice or guidance. It is purely informational. Please contact a qualified tax or employment attorney before making any decisions regarding this information.